The Value-Add Moneymaker

As the trend toward the "connected" or "smart" home grows, security dealers have a chance to cash in on the boom. By integrating systems to control lighting, heating and similar energy consumption, security dealers can up-sell customers to everyone's gratification.

"There will be a real growth opportunity for best-in-class, turnkey systems for the residential market over the next several years," predicted Rich Matthews, residential sales director, Lutron Electronics, Coopersburg, Pa.

The downside is that many security dealers seem unwilling to embrace the new technology and take advantage of the opportunity to up-sell existing customers, according to Bill Ablondi, director of Home Systems Research, Parks Associates, Dallas.

Paul Machacek, international sales manager for Environmental Security Products at Winland Electronics, Mankato, Minn., added, "a lot of security dealers are so focused on traditional security services that they do not want to venture into other systems in the building." However, there are simple computer languages like BacNet that make connectivity with HVAC systems easy to install.

"The installer has a great value proposition," Matthews added. "Instead of the customers buying a system that they hope they never have to use, they have a system that will save them money, allow them to control settings, interact with elements in their home and is fun to use from their iPad or Android."

In addition, Matthews noted, "these energy management systems create a much 'stickier' customer," one who has more of a propensity to stay with the service provider for the long haul.

Take the right sales approach and tact

Instead of marketing simply a home security system, a dealer can offer a customer a money-saving investment that will help keep energy costs under control. Meantime, the proposition earns more recurring monthly revenue (RMR), taking a typical $20 monthly security bill to $40 and upwards for the added benefit of light and temperature control.

"People who have a security system in their home are more willing to acquire an energy management system much moreso than those without security systems," said Ablondi.

Research from Parks Associates (see chart) shows that those who already own a security system would pay a one-time fee of nearly $130 to install a device that would cut 20 percent off their electricity bill per year-versus only $100 for those who do not subscribe to a security system. On top of that, 40 percent of those with security systems are interested in energy management versus 25 percent of those without.

The opportunity exists for commercial customers too. "There is a great chance to increase RMR by providing this kind of service," said Machacek. "It can take a business to providing another level of RMR by monitoring computer rooms to inform alarm systems of extreme conditions." This includes heat, humidity, airflow and CO2 levels.

The average U.S. household spends more than $2,200 a year on energy bills-almost half of which goes to heating and cooling the home. Additionally, 95.8 million households (86.2 percent of U.S. households) have a thermostat, according to the U.S. Energy Information Administration (EIA).

"Everyone with a thermostat can benefit from an energy management system that helps them heat and cool their home more efficiently, as well as enables them to reduce the energy consumed unnecessarily by lights and appliances," said Alison Slavin, vice present of Product Management, Alarm.com, Vienna, Va.

Some security firms already are trying to educate consumers about how value-added energy monitoring services can save them money. And they still have to deal with only one service provider-their trustworthy security firm.

Educating customers and dealers is key

"The challenging part is the education of consumers," said Farhan Abid, research analyst with Parks Associates, Dallas. "It is a new and alien concept to them."

ADT Pulse is pushing the message through nationwide marketing. In fact, there are almost 30 YouTube videos extolling the product's ability to provide security and save money with interactive services.

Alarm.com's offering lets customers set up daily thermostat schedules that map to their routine, via the Web. "At any time, from anywhere, a user can override the local thermostat schedule through their smartphone or computer if their schedule for the day changes, or if they are looking to save a bit more on energy," Slavin said.

The need to lower energy costs and consumption is real everywhere. Abid noted that each state regulates utilities a bit differently. However, the push seems biggest in areas like California and the West Coast, along the East Coast and around cities like Houston where energy consumption is expensive.

"In some areas, utilities are spending a lot of money educating the consumer," Ablondi added. This educated consumer will be more likely to buy from someone. The question is: who will make the sale?

Many packages will be available: security plus energy; energy plus home entertainment; a utility-sponsored kit. Whoever gets to the customer first is likely to keep that customer for some time.

"It is not clear-cut who will win the customer," Abid said. "It is not a zero-sum game." He foresees cases where a utility might hire a security firm to install energy monitoring equipment in its customers' homes.

The "green" sell is not compelling for everyone, according to Abid's research. Most people are not tree-huggers. But universal is the interest in saving money. "Regardless of who provides the tools, the customer is very interested in getting information about energy use," Abid said.

With energy costs in Houston-based Centerpoint Energy Inc.'s market ranging from eight cents per kWH in slack times to 13 cents per kWH in peak times (usually 1 to 6 p.m. when the grid is most stressed), there is ample opportunity to point out how in-home programmable units that work with Advanced Metering Infrastructure (AMI) can save money.

What you don't know can cost you

"Vampire loads" add to every homeowner's electric bill. These are appliances that draw current even though they ostensibly are off (computer monitors are a good example). Controlling these vampire loads will save a customer about 10 percent more money.

Shade controls on the window system will cut HVAC costs, potentially saving the customer another 10 percent. Temperature control can result in a savings of 16 percent.

Lutron, which offers RadioRa 2 as an upgrade to its RadioRa system, will bring to market new temperature and appliance control offerings in the first four months of 2011. "If you look at a suite of products on one platform, the energy savings is significant," said Matthews.

Slavin noted that energy management systems have been adopted almost exclusively by the higher end of the market because they were expensive and focused more on convenience than energy savings.

"With cost-effective solutions now available, we see the mass market beginning to adopt this technology," Slavin added. "Although the high end of the market has more disposable income to spend on an energy management system, the mass market has the most to gain by investing in an energy management system that helps them effectively reduce their energy consumption and energy bills each month."

2Gig Technologies works with products from companies like APX Alarm and Alarm.com to deliver Z-Wave-based systems for energy control. Spearheaded by the Z-Wave Alliance, an international consortium of manufacturers who build interoperable Z-Wave enabled devices, the protocol is based on low-power RF radios embedded or retrofitted into home electronics devices and systems. They provide control of automation solutions running home lighting, access control, entertainment systems and household appliances.

"Having in-home, programmable thermostats and remote-control modules will allow consumers to use electricity based on price," said Abid. Smart appliances, (i.e.refrigerators, dishwashers, laundry dryers) come with embedded chips that allow two-way communications. These energy-saving platforms, at their most basic, can integrate into a security panel with contact closures.

In addition to saving money, they will assist the security system in the event of an intruder. "The system will turn on selected lights to full bright to scare off an intruder," said Matthews. They can cause the landscape lighting or porch lights to flash, scaring off the potential interloper, making it obvious to security or police which house has sent the alarm. In either case, the local dimmer is locked until the panel is re-armed.

Transitioning to newer technology and methods is not always easy but dealers and integrators need to get on board with integrated security and smart home offerings to reap the benefits of what these value-adds can offer.

The sum of it all

"There is a trend to best-in-class for home systems," confirmed Matthews. "That is the key sales direction for the local dealer-you have a great value proposition by offering the homeowner the ability to save money and interact with elements in the home."

Abid's studies show there were 16 million homes with AMI by the end of 2010. He expects that figure to rise to 55 million meters-or 45 percent of US households-by 2015.

NEW NAME AND FOCUS FOR TOP FIRM

First came the acquisition of Meter Solutions, based in Orem, Utah, a company specializing in the installation of Automated Metering Infrastructure systems (AMI), technology that automatically collects data from utilities and transmits it wirelessly. It was an interesting strategy for APX Alarm Security Solutions Inc., Provo, Utah, which mostly grew "organically," said Alex Dunn, chief operating officer. Then came word that on February 1, APX Alarm, one of the nation's largest security companies, would change its name to Vivint, said Kristi Knight, vice president of Corporate Communications.

Knight told SD&I magazine in an exclusive interview that the name will be indicative of the company's continued move into residential energy management."Energy management and smart grids are the biggest area of growth in home automation and we wanted a name that was indicative of who we are and what we stood for," she said. According to Knight, 'Viv' represents the word live and 'int' stands for intelligence. New logos, colors, yard signs and overall rebranding strategies will be part of the planned change.

Curt Harler is a regular contributor to SD&I magazine. Reach him at curt@curtharler.com.
 

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